60350002 taxation-1-case-digests

Tax 1 Lex Talionis Fraternitas Inc.
Taxation 1
Case Digests
Pepsi-Cola vs Mun. of Tanauan (G.R. No. L-31156 Feb 27,
1976)
The legislative power to create political corporations for purposes of local
self-government courts with it the power to confer on such local
government agencies the power to tax.
Pepsi commenced a complaint with preliminary injunction
before the CFI of Leyte for that court to declare Section 2 of
R.A. 2264 (Local Autonomy Act) unconstitutional as an undue
delegation of taxing authority as well as declare Municipal
Ordinance Nos. 23 & 27 series of 1962 of Municipality of
Tanauan, Leyte null and void. Municipal Ordinance 23 levies
and collects from softdrinks producers and manufacturers a
tai of 1/16th
of a centavo for every bottle of softdrink corked.
On the other hand, Municipal Ordinance 27 levies and
collects on softdrinks produced or manufactured within the
territorial jurisdiction of the municipality a tax of 1 centavo
on each gallon of volume capacity. Both are denominated as
“municipal production tax”.
Issues: a) WoN section 2 of R.A. 2264 is an undue delegation
of power b) WoN Ordinances 23 & 27 constitute double
taxation and impose percentage or specific tax c) WoN
Ordinances 23 and 27 are unjust and unfair
Held: a) No, it is true that power of taxation is purely
legislative and which the central legislative body cannot
delegate either to the executive or judicial department of
the government without infringing upon the theory of
separation of powers but the exception lies in the case of
municipal corporations to which the said theory does not
apply. Legislative concerns may be delegated to local
governments in respect of matters of local concerns. By
necessary implication, the legislative power to create
political corporations for purposes of local self-government
courts with it the power to confer on such local government
agencies the power to tax. The constitution grants local
government the autonomous authority to create their own
sources of revenue and to levy taxes.
b) No, the difference between the two ordinances clearly lies
in the tax rate of the soft drinks produced: in Ordinance No.
23, it was 1/16 of a centavo for every bottle corked; in
Ordinance No. 27, it is one centavo (P0.01) on each gallon
(128 fluid ounces, U.S.) of volume capacity. The intention of
the Municipal Council of Tanauan in enacting Ordinance No.
27 is thus clear: it was intended as a plain substitute for the
prior Ordinance No. 23, and operates as a repeal of the
latter, even without words to that effect. Plaintiff-appellant
in its brief admitted that defendants-appellees are only
seeking to enforce Ordinance No. 27, series of 1962.
Undoubtedly, the taxing authority conferred on local
governments under Section 2, Republic Act No. 2264, is broad
enough as to extend to almost "everything, accepting those
which are mentioned therein." The limitation applies,
particularly to the prohibition against municipalities and
municipal districts to impose "any percentage tax or other
taxes in any form based thereon nor impose taxes on articles
subject to specific tax except gasoline, under the provisions
of the National Internal Revenue Code." For purposes of this
particular limitation, a municipal ordinance which prescribes
a set ratio between the amount of the tax and the volume of
sale of the taxpayer imposes a sales tax and is null and void
for being outside the power of the municipality to
enact. But, the imposition of "a tax of one centavo (P0.01)
on each gallon of volume capacity" on all soft drinks
produced or manufactured under Ordinance No. 27 does not
partake of the nature of a percentage tax on sales, or other
taxes in any form based thereon. The tax is levied on the
produce (whether sold or not) and not on the sales. The
volume capacity of the taxpayer's production of soft drinks is
considered solely for purposes of determining the tax rate on
the products, but there is not set ratio between the volume
of sales and the amount of the tax. Nor can the tax levied be
treated as a specific tax. Specific taxes are those imposed on
specified articles, such as distilled spirits, wines, fermented
liquors, products of tobacco other than cigars and cigarettes,
matches firecrackers, manufactured oils and other fuels,
coal, bunker fuel oil, diesel fuel oil, cinematographic films,
playing cards, saccharine, opium and other habit-forming
drugs. Soft drink is not one of those specified.
c) The tax of one (P0.01) on each gallon (128 fluid ounces,
U.S.) of volume capacity on all softdrinks, produced or
manufactured, or an equivalent of 1-½ centavos per
case, cannot be considered unjust and unfair. An increase
in the tax alone would not support the claim that the tax is
oppressive, unjust and confiscatory. Municipal corporations
are allowed much discretion in determining the rates of
imposable taxes. This is in line with the constitutional policy
of according the widest possible autonomy to local
governments in matters of local taxation, an aspect that is
given expression in the Local Tax Code (PD No. 231, July 1,
1973). Unless the amount is so excessive as to be prohibitive,
courts will go slow in writing off an ordinance as
unreasonable. Reluctance should not deter compliance with
an ordinance such as Ordinance No. 27 if the purpose of the
law to further strengthen local autonomy were to be
realized.
CIR vs. Algue Inc. (G.R. No. L-28896 Feb 17, 1988)
Taxes are the lifeblood of the government and so should be collected
without unnecessary hindrance. On the other hand, such collection should
be made in accordance with law as any arbitrariness will negate the very
reason for government itself. It is therefore necessary to reconcile the
apparently conflicting interests of the authorities and the taxpayers so that
the real purpose of taxation, which is the promotion of the common good,
may be achieved.
Philippine Sugar Estate Development Company appoints Algue
as its agent authorizing it to sell its land, factories and oil
manufacturing process. Family members Guevara et al
worked for the formation of Vegetable Oil Investment Corp
inducing persons to invest in it. After its incorporation largely
through the promotion of Guevara et al, VOIC purchased
PSEDC properties. For the sale, Algue received as agent a
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commission of 126k and it was from this commission that the
75k promotional fees were paid to Guevara et al.
Issue: WON Sunga the collector of Internal Revenue correctly
disallowed the 75k deduction claimed by private respondent
Algue as legitimate business expensed in its income tax
returns
Held: No, claimed deduction was an ordinary reasonable or
necessary business expense. Amount has been legitimately
paid by Algue for actual services rendered. The payment was
in the form of promotional fee and collected by the payees
for their in the creation of VOIC and its subsequent purchase
of the properties of the PSEDC. It is immaterial that it was
paid to the family members owning Algue who rendered
services as the promotional fee was not excessive. Although
the Solicitor General is correct when he said that the burden
is on the taxpayer to prove the validity of claimed deduction.
In the present case, however, SC find that the onus has been
discharged satisfactorily. Algue has proved that the payment
of fees was necessary and reasonable in the light of the
efforts exerted by the payees in inducing investors and
prominent businessmen to venture in an experimental
enterprise and involved themselves in a new business
requiring millions of pesos. This was no mean feat and should
be, as it was, sufficiently recompensed. It is said that taxes
are what we pay for civilization society. Without taxes, the
government would be paralyzed for lack of the motive power
to activate and operate it. Hence, despite the natural
reluctance to surrender part of one's hard earned income to
the taxing authorities, every person who is able to must
contribute his share in the running of the government. The
government for its part, is expected to respond in the form
of tangible and intangible benefits intended to improve the
lives of the people and enhance their moral and material
values. This symbiotic relationship is the rationale of
taxation and should dispel the erroneous notion that it is an
arbitrary method of exaction by those in the seat of power.
But even as we concede the inevitability and indispensability
of taxation, it is a requirement in all democratic regimes
that it be exercised reasonably and in accordance with the
prescribed procedure. If it is not, then the taxpayer has a
right to complain and the courts will then come to his succor.
For all the awesome power of the tax collector, he may still
be stopped in his tracks if the taxpayer can demonstrate, as
it has here, that the law has not been observed.
Maceda vs ERB (G.R. No. 95203-05 Dec 18, 1990)
The Energy Regulatory Board order authorizing the proceeds generated by
the increase in the prices of petroleum products to be deposited to the Oil
Price Stabilization Fund is not an act of taxation.
The petitioners pray for injunctive relief, to stop the Energy
Regulatory Board from implementing its Order, dated
September 21, 1990, mandating a provisional increase in the
prices of petroleum and petroleum products. The petitioner,
Senator Ernesto Maceda, also submits that the same was
issued without proper notice and hearing in violation of
Section 3, paragraph (e), of Executive Order No. 172; that
the Board, in decreeing an increase, had created a new
source for the Oil Price Stabilization Fund (OPSF), or
otherwise that it had levied a tax, a power vested in the
legislature, and/or that it had "re-collected", by an act of
taxation, ad valorem taxes on oil which Republic Act No.
6965 had abolished.
Issue: WON the Board authorizing the proceeds generated by
the increase to be deposited to the OPSF is an act of taxation
Held. No. The Board Order authorizing the proceeds
generated by the increase to be deposited to the OPSF is not
an act of taxation. It is authorized by Presidential Decree No.
1956, as amended by Executive Order No. 137. Anent claims
that oil companies cannot charge new prices for oil
purchased at old rates, suffice it to say that the increase in
question was not prompted alone by the increase in world oil
prices arising from tension in the Persian Gulf. What the
Court gathers from the pleadings as well as events of which it
takes judicial notice, is that: (1) as of June 30, 1990, the
OPSF has incurred a deficit of P6.1 Billion; (2) the exchange
rate has fallen to P28.00 to $1.00; (3) the country's balance
of payments is expected to reach $1 Billion; (4) our trade
deficit is at $2.855 Billion as of the first nine months of the
year. Evidently, authorities have been unable to collect
enough taxes necessary to replenish the OPSF as provided by
Presidential Decree No. 1956, and hence, there was no
available alternative but to hike existing prices. The OPSF, as
the Court held in the aforecited CACP cases, must not be
understood to be a funding designed to guarantee oil firms'
profits although as a subsidy, or a trust account, the Court
has no doubt that oil firms make money from it. As we held
there, however, the OPSF was established precisely to
protect the consuming public from the erratic movement of
oil prices and to preclude oil companies from taking
advantage of fluctuations occurring every so often. As a
buffer mechanism, it stabilizes domestic prices by bringing
about a uniform rate rather than leaving pricing to the
caprices of the market.
Paras (dissenting): Anent the unconstitutional use of the taxing power, the
decision of the majority says that "the Board Order authorizing the proceeds
generated by the increases" is "authorized by Presidential Decree No. 1456,
as amended by Executive Order No. 137". Assuming that such is authorized
by law, still a law, no matter how imperative, cannot prevail over the
Constitution which grants only to Congress the power to tax. And indeed,
there can be no denying the fact that when revenue is earned by the
government from the consuming public (except when only licenses are
concerned) there is an exercise of the taxing power.
Victorias Milling vs PPA (G.R. No. 73705 Aug 27, 1987)
Berthing charges against a vessel are collectible regardless of the fact that
mooring or berthing is made from a private pier or wharf. This is because
the government maintains bodies of water in navigable condition and it is
to support its operations in this regard that dues and charges are imposed
for the use of piers and wharves regardless of their ownership.
On April 28, 1981, the Iloilo Port Manager of respondent
Philippine Ports Authority (PPA for short) wrote petitioner
Victorias Milling Co., requiring it to have its tugboats and
barges undergo harbor formalities and pay entrance/
clearance fees as well as berthing fees effective May 1, 1981.
PPA, likewise, requiring petitioner to secure a permit for

cargo handling operations at its Da-an Banua wharf and remit
10% of its gross income for said operations as the
government's share. To these demands, petitioner sent two
(2) letters, both dated June 2, 1981, wherein it maintained
that it is exempt from paying PPA any fee or charge because:
(1) the wharf and an its facilities were built and installed in
its land; (2) repair and maintenance thereof were and solely
paid by it; (3) even the dredging and maintenance of the
Malijao River Channel from Guimaras Strait up to said private
wharf are being done by petitioner's equipment and
personnel; and (4) at no time has the government ever spent
a single centavo for such activities. Petitioner further added
that the wharf was being used mainly to handle sugar
purchased from district planters pursuant to existing milling
agreements.
Issue: WON Victorias is exempted from the claimed fees and
charges due to the fact that the port is privately owned
Held: No, as correctly stated by the Solicitor General, the
fees and charges PPA collects are not for the use of the
wharf that petitioner owns but for the privilege of navigating
in public waters, of entering and leaving public harbors and
berthing on public streams or waters. In Compañia General
de Tabacos de Filipinas vs. Actg. Commissioner of Customs
(23 SCRA 600), this Court laid down the rule that berthing
charges against a vessel are collectible regardless of the fact
that mooring or berthing is made from a private pier or
wharf. This is because the government maintains bodies of
water in navigable condition and it is to support its
operations in this regard that dues and charges are imposed
for the use of piers and wharves regardless of their
ownership. As to the requirement to remit 10% of the
handling charges, Section 6B-(ix) of the Presidential Decree
No. 857 authorized the PPA "To levy dues, rates, or charges
for the use of the premises, works, appliances, facilities, or
for services provided by or belonging to the Authority, or any
organization concerned with port operations." This 10%
government share of earnings of arrastre and stevedoring
operators is in the nature of contractual compensation to
which a person desiring to operate arrastre service must
agree as a condition to the grant of the permit to operate.
CIR vs Ateneo de Manila (G.R. No. 115349 Apr 18, 1997)
While it is conceded that statutes providing for election contests are to be
liberally construed to the end that the will of the people in the choice of
public officers may not be defeated by mere technical questions, the rule
likewise stands, that in an election protest, the protestant must stand or
fall upon the issues he had raised in his original or amended pleading filed
prior to the lapse of the statutory period for filing of the protest.
Private respondent is a non-stock, non-profit educational
institution with auxiliary units and branches all over the
Philippines. One such auxiliary unit is the Institute of
Philippine Culture (IPC), which has no legal personality
separate and distinct from that of private respondent. The
IPC is a Philippine unit engaged in social science studies of
Philippine society and culture. Occasionally, it accepts
sponsorships for its research activities from international
organizations, private foundations and government agencies.
On July 8, 1983, private respondent received from petitioner
Commissioner of Internal Revenue a demand letter dated
June 3, 1983, assessing private respondent the sum of
P174,043.97 for alleged deficiency contractor's tax, and an
assessment dated June 27, 1983 in the sum of P1,141,837 for
alleged deficiency income tax, both for the fiscal year ended
March 31, 1978. Denying said tax liabilities, private
respondent sent petitioner a letter-protest and subsequently
filed with the latter a memorandum contesting the validity of
the assessments.
Issue: WON Ateneo de Manila University, through its auxiliary
unit or branch, the Institute of Philippine Culture, performing
the work of an independent contractor and thus subject to
the 3% contractor's tax levied by then Section 205 of the
National Internal Revenue Code?
Held: No, Petitioner Commissioner of Internal Revenue erred
in applying the principles of tax exemption without first
applying the well-settled doctrine of strict interpretation in
the imposition of taxes. It is obviously both illogical and
impractical to determine who are exempted without first
determining who are covered by the aforesaid provision. The
Commissioner should have determined first if private
respondent was covered by Section 205, applying the rule of
strict interpretation of laws imposing taxes and other
burdens on the populace, before asking Ateneo to prove its
exemption therefrom. The Court takes this occasion to
reiterate the hornbook doctrine in the interpretation of tax
laws that "(a) statute will not be construed as imposing a tax
unless it does so clearly, expressly, and unambiguously . . .
(A) tax cannot be imposed without clear and express words
for that purpose. Accordingly, the general rule of requiring
adherence to the letter in construing statutes applies with
peculiar strictness to tax laws and the provisions of a taxing
act are not to be extended by implication." Parenthetically,
in answering the question of who is subject to tax statutes, it
is basic that "in case of doubt, such statutes are to be
construed most strongly against the government and in favor
of the subjects or citizens because burdens are not to be
imposed nor presumed to be imposed beyond what statutes
expressly and clearly import. To fall under its coverage,
Section 205 of the National Internal Revenue Code requires
that the independent contractor be engaged in the business
of selling its services. Hence, to impose the three percent
contractor's tax on Ateneo's Institute of Philippine Culture, it
should be sufficiently proven that the private respondent is
indeed selling its services for a fee in pursuit of an
independent business. And it is only after private respondent
has been found clearly to be subject to the provisions of Sec.
205 that the question of exemption therefrom would arise.
Only after such coverage is shown does the rule of
construction — that tax exemptions are to be strictly
construed against the taxpayer — come into play, contrary to
petitioner's position. There is no evidence to prove that
Ateneo's Institute of Philippine Culture ever sold its services
for a fee to anyone or was ever engaged in a business apart
from and independently of the academic purposes of the
university.

Figuerres vs Mandaluyong (G.R. No. 119172 Mar 25, 1999)
The presumption of validity in favor of a tax ordinance, its constitutionality
or legality should be upheld in the absence of evidence showing that the
procedure prescribed by law was not observed in their enactment.
Petitioner Belen C. Figuerres is the owner of a parcel of land,
covered by Transfer Certificate of Title No. 413305, and
located at Amarillo Street, Barangay Mauway, City of
Mandaluyong. In 1993, she received a notice of assessment,
dated October 20, 1993, from the municipal assessor of the
then Municipality of Mandaluyong. The assessment, effective
in the year 1994, was based on Ordinance Nos. 119 and 125,
series of 1993, and Ordinance No. 135, series of 1994, of the
Sangguniang Bayan of Mandaluyong. Ordinance No. 119,
series of 1993, which was promulgated on April 22, 1993,
contains a schedule of fair market values of the different
classes of real property in the municipality. Ordinance No.
125, series of 1993, which was promulgated on November 11,
1993, on the other hand, fixes the assessment levels
applicable to such classes of real property. Finally,
Ordinance No. 135, series of 1994, which was promulgated on
February 24, 1994, amended Ordinance No. 119, §6 by
providing that only one third (1/3) of the increase in the
market values applicable to residential lands pursuant to the
said ordinance shall be implemented in the years 1994, 1995,
and 1996. Petitioner brought a prohibition suit in the Court
of Appeals against the Assessor, the Treasurer, and the
Sangguniang Bayan to stop them from enforcing the
ordinances in question on the ground that the ordinances
were invalid for having been adopted allegedly without
public hearings and prior publication or posting and without
complying with the implementing rules yet to be issued by
the Department of Finance.
Issue: WON the contention of Figuerres is tenable
Held: No, although the petitioner is right in contending that
public hearings are required to be conducted prior to the
enactment of an ordinance imposing real property taxes,
R.A. No. 7160, §186 provides that an ordinance levying taxes,
fees, or charges "shall not be enacted without any prior
public hearing conducted for the purpose." However, it is
noteworthy that apart from her bare assertions, petitioner
Figuerres has not presented any evidence to show that no
public hearings were conducted prior to the enactment of
the ordinances in question. On the other hand, the
Municipality of Mandaluyong claims that public hearings were
indeed conducted before the subject ordinances were
adopted, although it likewise failed to submit any evidence
to establish this allegation. However, in accordance with the
presumption of validity in favor of an ordinance, their
constitutionality or legality should be upheld in the absence
of evidence showing that the procedure prescribed by law
was not observed in their enactment. The lack of a public
hearing is a negative allegation essential to petitioner's cause
of action in the present case. Hence, as petitioner is the
party asserting it, she has the burden of proof. Since
petitioner failed to rebut the presumption of validity in favor
of the subject ordinances and to discharge the burden of
proving that no public hearings were conducted prior to the
enactment thereof, we are constrained to uphold their
constitutionality or legality.
Philex Mining vs CIR (G.R. No. 125704 Aug 28, 1998)
That taxes cannot be subject to compensation for the simple reason that
the government and the taxpayer are not creditors and debtors of each
other. There is a material distinction between a tax and debt. Debts are
due to the Government in its corporate capacity, while taxes are due to the
Government in its sovereign capacity.
Petitioner Philex Mining Corp. assails the decision of the
Court of Appeals promulgated on April 8, 1996 in CA-G.R. SP
No. 36975 affirming the Court of Tax Appeals decision in CTA
Case No. 4872 dated March 16, 1995 ordering it to pay the
amount of P110,677,668.52 as excise tax liability for the
period from the 2nd quarter of 1991 to the 2nd quarter of
1992 plus 20% annual interest from August 6, 1994 until fully
paid pursuant to Sections 248 and 249 of the Tax Code of
1977. The facts show that on August 5, 1992, the BIR sent a
letter to Philex asking it to settle its tax liabilities for the
2nd, 3rd and 4th quarter of 1991 as well as the 1st and 2nd
quarter of 1992 in the total amount of P123,821.982.52. In a
letter dated August 20, 1992, Philex protested the demand
for payment of the tax liabilities stating that it has pending
claims for VAT input credit/refund for the taxes it paid for
the years 1989 to 1991 in the amount of P119,977,037.02 plus
interest. Therefore these claims for tax credit/refund should
be applied against the tax liabilities. In reply, the BIR, in a
letter dated September 7, 1992, found no merit in Philex's
position. Since these pending claims have not yet been
established or determined with certainty, it follows that no
legal compensation can take place. Hence, the BIR reiterated
its demand that Philex settle the amount plus interest within
30 days from the receipt of the letter. Philex was able to
obtain its VAT input credit/refund not only for the taxable
year 1989 to 1991 but also for 1992 and 1994. In view of the
grant of its VAT input credit/refund, Philex now contends
that the same should, ipso jure, off-set its excise tax
liabilities since both had already become "due and
demandable, as well as fully liquidated;" hence, legal
compensation can properly take place.
ISSUE: WoN Philex’s contention is tenable
Held: No, Philex’s contention is not tenable. In several
instances prior to the instant case, SC have already made the
pronouncement that taxes cannot be subject to
compensation for the simple reason that the government and
the taxpayer are not creditors and debtors of each other.
There is a material distinction between a tax and debt. Debts
are due to the Government in its corporate capacity, while
taxes are due to the Government in its sovereign capacity.
We find no cogent reason to deviate from the
aforementioned distinction. Prescinding from this premise, in
Francia v. Intermediate Appellate Court, we categorically
held that taxes cannot be subject to set-off or compensation,
thus: “We have consistently ruled that there can be no off-
setting of taxes against the claims that the taxpayer may
have against the government. A person cannot refuse to pay
a tax on the ground that the government owes him an

amount equal to or greater than the tax being collected.
The collection of a tax cannot await the results of a lawsuit
against the government.” The ruling in Francia has been
applied to the subsequent case of Caltex Philippines, Inc. v.
Commission on Audit, which reiterated that: “a taxpayer
may not offset taxes due from the claims that he may have
against the government. Taxes cannot be the subject of
compensation because the government and taxpayer are not
mutually creditors and debtors of each other and a claim for
taxes is not such a debt, demand, contract or judgment as is
allowed to be set-off.”
CIR vs Central Vegetable (G.R. No. 107135 Feb 23, 1999)
Tax burdens are not to be imposed or presumed to be imposed beyond what
the statute expressly and clearly imports, tax statutes being construed
strictissimi juris against the government.
CENVOCO is a manufacturer of edible and coconut/coprameal
cake and such other coconut related oil subject to the
miller's tax of 3%. Petitioner also manufactures lard,
detergent and laundry soap subject to the sales tax of 10%. In
1986, petitioner purchased a specified number of containers
and packaging materials for its edible oil from its suppliers
and paid the sales tax due thereon. After an investigation
conducted by respondent's Revenue Examiner, Assessment
Notice No. FAS-B-86-88-001661-001664 dated April 22, 1988
was issued against petitioner for deficiency miller's tax in the
total amount of P1,575,514.70. On June 29, 1988, CENVOCO
filed with CIR a letter dated June 27, 1988 requesting for
reconsideration of the above deficiency miller's tax
assessments, contending that the final provision of Section
168 of the Tax Code does not a apply to sales tax paid on
containers and packaging materials, hence, the amount paid
therefor should have been credited against the miller's tax
assessed against it. CIR contends that Sec. 188 of the Tax
Code provides that sales, miller's or excise taxes paid on raw
materials or supplies used in the milling process shall not be
allowed against the miller's tax due.
Issue: WoN the sales tax paid by CENVOCO when it purchased
containers and packaging materials for its milled products
can be credited against the deficiency miller’s tax due
thereon
Held: Yes, it can be credited against the deficiency miller’s
tax due thereon. The law relied upon by the BIR
Commissioner as the basis for not allowing Cenvoco's tax
credit is just a proviso of Section 168 of the old Tax Code.
The restriction in the said proviso, however, is limited only
to sales, miller's or excise taxes paid "on raw materials used
in the milling process". Under the rules of statutory
construction, exceptions, as a general rule, should be strictly
but reasonably construed. They extend only so far as their
language fairly warrants, and all doubts should be resolved in
favor of the general provisions rather than the exception.
Where a general rule is established by statute with
exceptions, the court will not curtail the former nor add to
the latter by implication. The exception provided for in
Section 168 of the old Tax Code should thus be strictly
construed. Conformably, the sales, miller's and excise taxes
paid on all other materials (except on raw materials used in
the milling process), such as the sales taxes paid on
containers and packaging materials of the milled products
under consideration, may be credited against the miller's tax
due therefor. It is a basic rule of interpretation that words
and phrases used in the statute, in the absence of a clear
legislative intent to the contrary should be given their plain,
ordinary and common usage or meaning. From the
disquisition and rationalization aforequoted, containers and
packaging materials are certainly not raw materials. Cans
and tetrakpaks are not used in the manufacture of Cenvoco's
finished products which are coconut, edible oil or coprameal
cake. Such finished products are packed in cans and
tetrapaks. It bears stressing that tax burdens are not to be
imposed or presumed to be imposed beyond what the statute
expressly and clearly imports, tax statutes being construed
strictissimi juris against the government.
CIR vs Fireman’s Fund (G.R. No. L-30644 Mar 9, 1987)
There is no justification for the government which has already realized the
revenue which is the object of the imposition of subject stamp tax, to
require the payment of the same tax for the same documents. Enshrined in
our basic legal principles is the time honored doctrine that no person shall
unjustly enrich himself at the expense of another. It goes without saying
that the government is not exempted from the application of this doctrine.
From January, 1952 to December, 1958, herein private
respondent Fireman's Fund Insurance Company entered into
various insurance contracts involving casualty, fire and
marine risks, for which the corresponding insurance policies
were issued. From January, 1952 to 1956, documentary
stamps were bought and affixed to the monthly statements
of policies issues; and from 1957 to 1958 documentary
stamps were bought and affixed to the corresponding pages
of the policy register, instead of on the insurance policies
issued. On July 3, 1959, respondent company discovered that
its monthly statements of business and policy register were
lost. The loss was reported to the Building Administration of
Ayala Building and the National Bureau of Investigation on
July 6, 1959. Herein petitioner was also informed of such loss
by respondent company, through the latter's auditors, Sycip,
Gorres and Velayo, in a letter dated July 14, 1959. After
conducting an investigation of said loss, petitioner's examiner
ascertained that respondent company failed to affix the
required documentary stamps to the insurance policies issued
by it and failed to preserve its accounting records within the
time prescribed by Section 337 of the Revenue Code by using
loose leaf forms as registers of documentary stamps without
written authority from the Commissioner of Internal Revenue
as required by Section 4 of Revenue Regulations No. V-1. As a
consequence of these findings, petitioner, in a letter dated
December 7, 1962, assessed and demanded from petitioner
the payment of documentary stamp taxes for the years 1952
to 1958 in the total amount of P 79,806.87 and plus
compromise penalties, a total of P 81,406.87.

Issue: WON respondent company may be required to pay
again the documentary stamps it has actually purchased,
affixed and cancelled
Held: No, as correctly pointed out by respondent Court of
Tax Appeals, under the National Internal Revenue Code,
documentary tax is deemed paid by: (a) the purchase of
documentary stamps; (b) affixture of documentary stamps to
the document or instrument taxed or to such other paper as
may be indicated by law or regulations; and (c) cancellation
of the stamps as required by law. It will be observed
however, that the over-riding purpose of these provisions of
law is the collection of taxes. The three steps above-
mentioned are but the means to that end. Thus, the
purchase of the stamps is the form of payment made; the
affixture thereof on the document or instrument taxed is to
insure that the corresponding tax has been paid for such
document while the cancellation of the stamps is to obviate
the possibility that said stamps will be reused for similar
documents for similar purposes. In the case at bar, there
appears to be no dispute on the fact that the documentary
stamps corresponding to the various policies were purchased
and paid for by the respondent Company. Neither is there
any argument that the same were cancelled as required by
law. It is a general rule in the interpretation of statutes
levying taxes or duties, that in case of doubt, such statutes
are to be construed most strongly against the government
and in favor of the subjects or citizens, because burdens are
not to be imposed or presumed to be imposed beyond what
statutes expressly and clearly import. There is no
justification for the government which has already realized
the revenue which is the object of the imposition of subject
stamp tax, to require the payment of the same tax for the
same documents. Enshrined in our basic legal principles is
the time honored doctrine that no person shall unjustly
enrich himself at the expense of another. It goes without
saying that the government is not exempted from the
application of this doctrine.

Extinguised based on delicts. Art. 89(1) of RPC, death of
convict occurs before final judgment, extinguished. But only
criminal liability is extinguished and also the civil liability
directly arising from and based solely on offense. Claim for
Civil liability survives if the same may also be predicated on
a source of oblig other than delict.
Source: Crimes or Delicts. Acts or omission.
DBP vs CA –Restructuring of Debt
DBP granted PHUMACO and PHILICO an industrial loan for
P2.5M, 2M in bonds and 500k in cash. Promissory note
executed and a mortgage over their present and future
properties. DBP granted another loan of 1.7M reflected in the
amended mortgage contract. After 7 yrs the outstanding
balance was restructured bec Resp failed to pay. Resp still
failed to pay under the restructured payment. DBP
refinanced the matured obligation and granted 3 foreign
currency denominated loans. Apart from interest, there are
additional charges and penalties in case of default. After 10
years, DBP initiated for forclosure of mortgaged prop and the
balance shoot up to P63M. Resp claim that reason for non-
payment is because financial rehabilitation from a contract
with the military didn’t push thru.
Issue: WON the resp can claim without fault in default of the
non-happening of the contract with the military.
Held: NO. DBP is no party to resp and AFP’s contract. Resp
can claim from AFP but without prejudice to its contract with
DBP. DBP has given Resp all the possible options for payment.
Source: Contract
II. NATURE AND EFFECTS OF OBLIGATION
A. Obligation to give
1. Determinate Thing
Equatorial vs. Mayfair—Right of First Refusal
Carmelo owned a parcel of land with 2-storey building and
leased said portions to Mayfair. On their contract, stipulation
that Mayfair has 30-day exclusive option to purchase the
same should the lessor decide to sell the leased premises.
But Carmelo wanted to sell the whole property. He sold
entire prop to Equatorial. Mayfair filed for annulment of sale
bec of lack of consideration. Mayfair claimed that he told
Carmelo that it is willing to purchase the same and that it
has the right of first refusal.
Issue: WON the sale can be nullified because of Mayfair’s
action
Held: The contract is deemed rescinded. Rescission a relief
allowed for protection of one of the contracting parties and
even 3rd
persons from injury or to protect some incompatible
and preferred right by the contract. Mayfair has the
opportunity to negotiate.
Determinate Thing: There is a problem because
determination cannot be made bec prop is indivisible. You
cannot pinpoint which is the 25% of the property.
Determination of the exact portion of the building.
De Leon vs. Soriano—bigyan ng palay si nanay.
Natural children of Soriano agreed that they are to deliver
certain number of cavanes of palay each year to Soriano and
shall only cease upon death of mother. But deliveries were of
3,400 cavanes and children claimed that due to Huk troubles
in Central Luzon.
Issue: WON inability to deliver was permissible due to force
majeure
Held: No. The object to be delivered was generic and set no
bounds or limits to the palay to be paid. Any palay of the
same quality can replace. Impossibility must consist in the
nature of the thing to be done and not the inability of the
party to do it.
Norkis vs. CA—Ako ang bumili ng motor iba ang gumamit.
Nepales bought a motorcycle from Norkis and issued a chattel
mortgage in favor of DBP. Invoice was issued and motorcycle
was registered by Norkis evidenced by receipts of
registration. Motor was delivered to a certain Julian Nepales
and an accident happened while being driven by a certain
Payba. Norkis claims it cannot be held liable since ownership
was already transferred to Nepales evidenced by the receipts
and the invoice.
Issue: WON ownership was transferred to Nepales.
Held: No. No actually delivery nor constructive one. The
receipts of reg fees and the invoice is nothing but a detailed
statement of the nature and quantity sold and not a bill of
sale. Intent considered. Intent was not to transfer ownership
but to facilitate execution of chattel mortgage.
Determinate Thing: The motorcycle was a generic thing. (?)
Heirs of Juan San Andres vs. Rodriguez—Binili ko na ang
nakapaligid na lupa.
JSA sold 345 sqm lot to Rodriguez. There was a deed of sale.
JSA died and Rodriguez appointed administrator. The heirs
engaged services of a geodetic engg and found out that resp
has encroached the lot by 509 sqm. They sent letter to
vacate. Resp claimed they bought the said portion of the lot
the ff day when they first bought the 345 sqm lot. Proof of
sale was attached and that payable in 5 years. Resp
deposited the balance in court.

Issue: WON there was a contract of sale.
Held: Yes. There was a contract of sale which transferred the
ownership to resp. Pet claimed that the object cannot be
determined with sufficient certainty. Court held that it is
capable of being determined w/o need for new contract and
the receipts showed that payment was to the lot adjoining
the prev paid lot on three sides thereof. The land is
determinate or determinable. Ownership transferred by
constructive delivery which is the execution of public
document.
Determinate Thing: The lot.
2. Generic Thing
Norkis vs. CA
Generic thing: motorcycle
PLDT vs. Jeturian—Pension bago gera.
PLDT adopted in 1923 a Plan for Emloyees Pension. In 1945
the BOD adopted a resolution discontinuing the pension plan.
Hence this action of Resp.
Issue: WON the pre-war employees are entitled to the
pension.
Held: Yes. But with the exception of those who died or left
before the outbreak of the war. The pension plan was not a
gratuity but an inducement for employees to continue
indefinitely in service. The plan ripened into a binding
contract upon its implied acceptance of the employees.
Acceptance is inferred from their entering the employ of the
company and staying after the plan was made known. PLDT
argues that it can only be held liable under the conditions
expressly set in the pension plan. But the Court held that the
Company that violated the contract with its employees, by
discontinuing the plan without their consent, is not in the
position to insist upon the terms of the very contract they
have breached.
CO vs. CA—pinagawa kong kotse, na-carnap.
Pet entrusted his car to Resp to make same job repair
services and supply of parts which was to be returned after 3
days as per the contract. Pet paid in full. After 3 days the
vehicle can’t still be released due to failed battery so pet
bought battery. When Pet was about to get it, resp said the
car was carnapped while being road-tested. Resp claims
force majeure.
Issue: WON Resp will be liable for the carnapping.
Held: Yes. It was due to negligence premised on delay which
is the basis of the complaint. Carnapping cannot be
considered as fortuitous. It must be proved and established
that it is an act of God. No other evidence but the police
report. Even when Pet agreed to resked repair, can’t be
taken as waiver bec he really has no other choice but to
leave it since he can’t have it run.
3. Effect of Loss
Bunge vs. Camenforte—Copra ko sa’yo binenta ko.
Plaintiffs filed to recover certain damages from the def bec
of the latter’s failure to deliver Phil copra they agreed to
deliver. A contract was entered into where the VPC sold 500
tons of Phil Copra to BC. The vendor would ship the copra to
USA but even with demands, failed to do so. The vendee
however believed in good faith that it shall be delivered so it
sold the expected copra to EDOW. Bec vendor failed, vendee
suffered damages. VPC denies contract and said that
Vicente, the manager who contracted had no authority to do
so. Force majeure is also claimed since a storm destroyed the
bodega.
Issue: WON VPC is held liable.
Held: Yes. Subject matter is Phil Copra, does not refer to any
particular or specific copra. Since generic, obligation can’t
be deemed extinguished by the destruction/disappearance.
Obligation subsists as long as commodity is available. Pet can
also sell the copra which they expect to acquire in the future
for purposes of speculation.
Effect: Subsistence of obligation since generic object.
Ocena vs. Jabson—subdivision na kontrata, maling akala.
Resp filed a complaint for modification of the terms and
conditions of its subdivision contract with petitioners.
Allegations are that price in oil and derivatives have
increased, not within the control of the plaintiff. It will
cause unjust enrichment to the pet. In the contract, the pet
are guaranteed as landowners and that they will receive 40%
of all cash receipts from the sale of the subdivision lots. Resp
hinged their argument on 1267 when the service has become
so difficult beyond contemplation, release from obligation.
Issue: WON there is a sufficient cause of action for
modification of the subdivision contract.
Held: No. Cited article does not grant the courts this
authority to remake, modify or revise the contract. Their
contract has a force of law and should there be substitution
or modification, it should be amongst the parties themselves.
A showing of mere inconvenience, unexpected impediments
or increased expenses is not enough. Equity cannot relieve
from bad bargains simply bec they are such.
Effect: The contract has the force of law.

B. Obligation to do
Hahn vs. CA—I want these diamond rings.
Santos received 2 diamond rings with a total amount of 47K.
She issued separate receipts therefore in which she
acknowledged that they have been delivered by Letty Hahn
for sale on commission and that they would be returned upon
demand if unsold. The rings were not sold nor returned after
demand. Thus this action.
Issue: WON the contract was of sale or agency.
Held: Of agency. There is no evidence that would tell that is
was of sale. Their contract’s stipulation does not show it was
of sale. Although resp was willing to give a different object,
the debtor cannot compel the creditor to receive a diff
object.
To do: Deliver the rings, the specific rings.
Chavez vs. Gonzales—Dahil sa typewriter.
P delivered to D a typewriter for D to repair. D was not able
to repair the typewriter and asked for P6 for spare parts. P
went to D and demanded the typewriter which D gave in a
wrapped package. When P opened it at home, he saw that
the typewriter had missing parts and found it in shambles. P
demanded missing parts, interior cover and P6. P brought it
to a diff repair shop and spent P89.95. P filed for payment of
P90 and damages.
Issue: WON D is liable for damages.
Held: Yes. 1167 states that when a person is obliged to do
something and fails to do the same, it shall be executed at
his cost. What is poorly done be undone. D claims no period
but Court held that fixing a period would only be a mere
formality and would serve no purpose than to delay. Liable
under 1170.
To do: Specific performance – repair typewriter.
Oceana vs Jabson—subdivision kontrata, maling akala.
To do: To give 40% of the cash receipts from sale of
subdivision lots.
**Woodhouse vs. Halili—Mission Softdrinks
P and D entered into an agreement that they will form a
partnership for the bottling and distribution of Mission
softdrinks, P as manager and D as capitalist. When the
bottling plant was in operation P wants to execute the
partnership papers but D refuses. D claims that he was made
to believe that P has the exclusive ownership of the bottling
franchise.
Issue: WON the misrepresentation of P can vitiate the
contract.
Held: No. Although P was guilty of misrepresentation, it was
not the causal consideration or the principal inducement that
led defendant to enter into the partnership. D may not be
compelled to carry out the agreement which is to execute
the partnership papers. The defendant has obligation to do
and not to give. The D reduced the percentage of P from 30%
to 15% bec of his misrepresentation.
Obligation to do: Execute partnership contract.
Ong vs. Bognalbal—She wants her Kenzo Tiles, now na.
Bognalbal was an architect hired by Ong who was a
businesswoman to construct her boutique. Bog agrees to
furnish labor within 45 days and owner to pay every 2 weeks
based on the accomplishment of work value. 4th
billing came
and Ong refused to pay but reason was not clear on the
record. She wanted to change Vinyl tiles to Kenzo flooring.
Ong claimed Bog abandoned job.
Issue: WON Bog be liable for abandoning job.
Held: No. He is not liable but is not justified for doing so.
1191, it was a reciprocal obligation and there is power to
rescind it in case one doesn’t comply with what is incumbent
upon him. But this article should be judicially invoked.
Novation is not presumed. There must be an express
stipulation. Novation a. change of obj or principal conditions,
b. substituting person of debtor c. subrogating 3rd
person in
the rights of creditor. Liability is on the first infractor, 1192.
There has been no contract novation that required Bog to
finish the Kenzo flooring before the 4th
billing shall be paid.
1186. Condition shall be deemed fulfilled when the obligor
voluntarily prevents the fulfillment.
To do: Pay 4th
billing. (Reciprocal-di mo ginawa di ko rin
gagawin-pero sabi nga ng court hindi pa rin yun justification,
but only the first infractor shall be liable).
C. Obligation not to do
Fajardo vs. Freedom to Build—Wag dagdagan kung hindi
bawasan!
FTB, owner-developer and seller of low-cost housing, sold to
petitioner-spouses a house and lot. Restrictive covenant was
contained in the contract, easement. No upward and front
expansion which is contained in their Transfer Certificate.
Pet’s children are to wed so extended their house thus
contravening the terms of contract. Pet filed, demolish the
unauth structures.
Issue: WON resp has the auth to ask for demolition since
ownership already transferred to the prop owners or
homeowners association.

Held: Yes. Restrictive covenant should still be followed.
Although courts generally view restrictive covenant with
disfavor but sustain them if reasonable, not contrary to
public policy, law etc. Intent of developer was to provide
safety, aesthetic and decent living conditions and prevent
overcrowding. Art. 1168, when ob consists in not doing,
obligor does what was forbidden, shall be undone at his
expense.
Not to do: Expand structures of house.
D. Effect of Breach
1. Delay in Performance
Villaruel vs. Manila Motors—Kasalanan ng lawyer, naningil
ng renta nung may gera.
Manila Motors and Villaruel entered into a contract whereby
the former agreed to convey by lease to the latter some
premises. The term of lease is 5 years. The premises were
invaded by the Japanese and then the American occupied the
same building. The occupants paid the same rate as the
defendants after which they have vacated the premises. Def
renewed contract for addtl 5 yrs. Pet, as per his lawyer’s
advise, demanded for rental from the Def for the period
when the Jap and the Americans occupied the premises. The
premises was set on fire and the reason was unknown.
Issue: WON Pet has power to demand rentals and recover the
same due to default.
Held: No. Art. 1554 of CC of Spain states the duties of a
lessor. A. deliver to the lessee the subject matter b. make
thereon, during the lease, all repairs necessary and maintain
serviceable condition c. maintain lessee in peaceful
enjoyment of lease. 1560, lessor shall not be liable for any
act of mere disturbance of 3rd
person but lessee would have
direct action against trespassers. No lessee would agree to
pay rent for premises he could not enjoy.
Delay in performance: It was the creditor who was in default
or delay when it refused to get the payment given by the
resp.
Lopez vs. Tan Tioco—Ibenta mo ang asukal pag sinabi kong
ibenta mo.
Lopez and Tan Tioco entered into a verbal contract that
she’ll deliver certain sugar to Tan Tioco which he obligated
himself to store until he receives instructions from her to sell
them. She delivered the piculs of sugar and instructed to sell
in on Sept 1904 but def did not do so. Pet filed action. Def
denies allegations.
Issue: WON the defendant was in default.
Held: Yes. He was in default from the time the Pet
demanded to deliver or do something, or the fulfillment of
the obligation. Neither the contract nor the law demands to
make judicial demand than extrajudicial. The price of the
sugar should be from the time she instructed the def to sell
them.
Delay in Performance: Delay in selling the sugar upon
instructions.
Dela Rosa vs. BPI—Atat sa announcement ng winners ng
design contest.
BPI held this contest of designs and plans for the construction
of a building. Prizes would be awarded not later than Nov.
30, 1921. Plaintiff took part in the said contest and after the
date stipulated, the bank didn’t award prize nor made any
announcement. Plaintiff filed.
Issue: WON BPI was in default when it did not release the
announcement on the date stipulated.
Held: The bank cannot be held in default through the mere
lapse of time. Plaintiff never demanded from bank and just
filed the case in Court. A binding obligation may originate
from advertisements addressed to the general public.
Demand will not be necessary only in certain conditions, but
demand is indispensable as a general rule. Plaintiff has no
cause of action bec he alleges that the contest didn’t push
thru but in consideration of the evidence, the materials are
on their way to New York and were sent to a technical
committee.
Delay: Bank was not in default. No demand.
Lizares vs. Hernaez—Camarin was burned and lessee won’t
pay.
Lizares and Hernaez entered into a contract, the former
became the lessee of the two haciendas. Pet used one of the
improvements there which was a roofed camarin used in
manufacture of sugar. A fire occurred and destroyed the
camarin. Pet demanded from Def that he reconstruct
camarin. Def refused. Pet did not pay the rentals bec of non-
construction of the camarin. Def claims Pet should be liable
for the fire since he is the lessee when the fire occurred.
Issue: WON plaintiff has responsibility to the damages caused
by fire.
Held. No. And so is the def. Force Majeure. But the plaintiff
is in default with regard to the non-payment of rentals due
to non-construction of camarin. Although there is
presumption against lessee when loss in the leased prop
occurs, proof is necessary to prove he is not responsible.
1183. When a thing is lost while in the possession of the
debtor, it is presumed that it loss occurred by his fault and
not by fortuitous even in the absence of the contrary.
Delay: Not in the Def for non-construction but in Plaintiff in
non-payment of rentals.

Bachrach Motor vs. Lee Tay—Kinuha ng Kano ang truck
niya, ayaw na niyang magbayad.
Def executed and delivered to the plaintiff a promissory note
payable in installments which represents the balance of one
white chasses purchased by def from pet. The truck was
delivered to the def. After the outbreak of war, the truck
was one of the trucks that were commandeered by the
USAFEE. Neither the plaintiff not def filed an official claim
from the US govt.
Issue: WON the commandeering of the truck exempts the def
from payment of the obligation represented by the prom
note.
Held: No. There is no principle of law by which the obligation
was extinguished. The interest was not reduced due to
suspension since the pet was generous enough to compute
only from 1948, the truck was commandeered in 1941. Def
could have filed a claim from the US govt and he would have
been paid but he failed to do so.
Delay: Non-payment of the prom note.
Lawyers Coop Pub vs. Tabora—bumili ng law books,
nasunog.
Tabora bought books from Pet and made partial payment. It
was delivered to his law office. On the same date, a fire
broke out in the office and destroyed the building including
the books. Def doesn’t want to pay balance since the books
were loss due to force majeure and the ownership has not
been transferred to him yet.
Issue: WON force majeure can be claimed by defendant from
his non-fulfillment of obligation.
Held: No. Ownership was already transferred to the buyer.
Although there has been an agreement that the ownership
shall remain with the seller until the price has been fully
paid, it was only for the security of payment but in the very
contract in was expressly agreed that the loss or damage
after delivery to the buyer shall be borne by the buyer.
Exemptions from liability due to fortuitous event: 1.
determinate thing (in the present case, pecuniary in nature)
2. No stipulation holding him liable even in case of fortuitous
Delay: Non-payment of balance.
Equatorial vs. Mayfair—right of first refusal
Delay: ***By not giving to Mayfair the 30-day period of which
it is entitled to exercise right of first refusal upon
communication of Carmelo that he would sell the property.
Co vs. CA--carnap
Delay: Delay in delivering the car to Co after demand which
is the premise of negligence of resp.
Aerospace vs. CA—Sulfuric Acid na ayaw pang kunin.
Pet purchased from resp Philphos 500 MT of Sulfuric Acid. In
their contract it was pet’s responsibility to get the acid from
resp. Philphos demanded that pet get the acid and pet
chartered a vessel MT Sultan but the vessel was not able to
get the whole volume bec it tilted. Resp sent a demand
letter that the acid should be emptied or else petitioner will
be liable for the storage and other incremental expenses if
pet fails to do so. Pet chartered MT Sultan again but it tilted
so never gotten the whole volume. Chartered another vessel
Don Victor and asked Resp to deliver additional orders. Resp
did not do so unless the remaining acid be emptied and that
pet pay the maintenance and storage. Pet filed and
contended Resp is in default.
Issue: WON the Resp is in default.
Held: No. The obligation to withdrew the 500MT of H2SO4
before Aug. 1989 and the resp was already ready to deliver
the same but it was Plaintiff’s fault for not chartering
another vessel which has the capacity to withdraw the
volume. It has the duty of emptying the acid. Pet claim that
it was due to a storm that’s why it can’t empty the storage
but evidence proved that it was of the incapability of the
vessels. There was an obligation on the pet to empty the
storage.
They were the ones in delay.
Delay: Pet for not emptying the storage.
Selegna vs. UCPB—credit facility which ballooned.
Selegna, rep by spouses Edgardo and Zenaida Angeles were
granted a credit facility for P70M by UCPB. As a security, pet
executed real estate mortgages over several parcels of land.
Pet also executed prom note every time they avail of credit
facility. In their credit agreement, it was stipulated that
failure to pay any availment of the accommodation or
interest or any sum due shall constitute an event of default
which shall allow resp bank to declare as immediate and
payable all outstanding availments together with accrued
interest. Pet increased credit facility and they agreed to
21.75% interest per annum. Demand letters were sent upon
failure to pay. Pet paid 10M as partial payment of accrued
interest. UCPB applied for extra-judicial foreclosure of
petitioners mortgaged properties. The obligation has
ballooned to 132M and pet alleged that 10M as payment had
the effect of updating and thereby averting the maturity of
the obligation.
Issue: WON the Pet were in default.
Held: Yes. The contract is the law and the resp is justified in
invoking the acceleration clause declaring the entire oblig
due and payable. The resp had the right to foreclose the

mortgages extra-judicially. Failure to furnish a detailed
statement of account doesn’t ipso facto result in
unliquidated obligation. Pet was in default.
Delay: Non-payment of availement of accommodation.
2. Non-fulfillment
Chavez vs. Gonzales
Non-fulfillment: The typewriter was not fixed.
Telefast vs. Castro—dahil sa telegrama, mag-isa lang nang
ilibing ang mama.
Consolacion Bravo-Castro died in Pangasinan and on the same
day the daughter sent a telegram to the US to inform the
other siblings and dad about death of Mom. The Mom was
interred by daughter alone. When she came back to the
states, she found out that the telegram never reached her
siblings. Telefast claimed force majeure bec of technical
and atmospheric factors but no evidence to support.
Issue: WON force majeure applies.
Held: No. No evidence to support. And even so, def should
have informed the plaintiff that it cannot transmit the
telegram. 1170 and 2176, guilty of fraud, negligence or
delay. 2217 for moral damages.
Non-fulfillment: Sending of telegram.
Tanguiling vs. CA—windmill na nasira sa wind.
A case involving proper interpretation of contract. JMI Engr
and GM proposed to resp Vicente to construct windmilling
system for him. They agreed on the construction for P60K.
P30K DP and P15K installment. Vincente didn’t pay the
remaining P15K bec he paid it to SPGMI who constructed the
deep well to which the windmill would be attached. And
even assuming that he owes pet P15K, it should have been
offset by the collapse after a strong wind.
Issue: a. WON agreement to construct windmill included in
the installation of a deep well.
b. WON the pet is under the obligation to reconstruct the
windmill.
Held: a. No. It was not included in the agreement. Intention
of the parties must be accorded primordial consideration and
in case of doubt, contemporaneous and subsequent acts shall
be principally considered.
b. Yes. Pet claimed there is a strong wind but this is actually
necessary for the windmill to turn. It was just newly
constructed, it should have not collapsed.
Non-fulfillment: Payment of last installment.
Perez vs. CA—niloko yung businessman at pinaalaga ang
fishpond.
Juan Perez usufructuary of a parcel of land called Papaya
Fishpond with other usufructuaries. The usufructuaries
entered into a contract leasing the fishpond to Luis Keh for a
period of 5 years. The contract states that the lessee cannot
sublease the fishpond nor assign his rights to anyone. But
Crisostomo was persuaded by the pet Keh to take over the
Papaya fishpond bec Cris is a businessman. Executed a
written agreement. Cris even paid the rentals until 1985, 10
years of taking care of the fishpond. In 1979 however, pet
with armed men went to fishpond and showed that Keh
surrendered the fishpond to the usufructuaries.
Issue: WON the resp is a sublessee of Keh which is barred by
the lease contract.
Held: Yes. He was a sublessee. But Perez and his counsel
knew and acquiesced to that arrangement by their act of
receiving from the resp rentals evidenced by the receipts
which puts the pet in estoppel—which arises when one by his
acts and representations and admission or by his own silence
when he is obliged to speak out, intentionally or thru
culpable negligence induces another to believe certain facts
to exist and such other rightfully relies and acts on such
beliefs so that he will be prejudiced if the former is
permitted to deny the existence of such facts. 1168: Oblig is
in not doing and obligor has done what is forbidden, shall be
done at his expense.
Non-fulfillment: of the obligation not to do which is to
sublease the fishpond.
3. Fraud
Board of Liquidators vs. Heirs of Maximo Kalaw—Copra
Trading, hindi na kelangan ng pirma ng Board of Directors.
Nacoco is for the protection, preservation and development
of the coconut industry. Kalaw is the manager and board
chairman. Nacoco embarked on copra trading activities, thus
entering into contracts. For 3 years, profited 3M but after 4
typhoons, left the coconut lands devastated throughout the
country. It was not able to fulfill the contracts it has engaged
in. Nacoco paid damages to one of the parties. Nacoco now
sues Kalaw for having approved the contracts.
Issue: WON Kalaw is guilty of negligence for entering into
contracts without prior approval of the Board of Directors.
Held: No. Consideration of practice. Corporate officer
entrusted with the gen management and control of business
has implied authority to make any contract or do other act
wichi is necessary or appropriate to the conduct of the
ordinary business of the corporation. But there is a citation
on the Nacoco’s by-laws requiring prior directorate approval
of Nacoco contracts. Court considered practice of trade of
short-sellling or forward sales. Prev contracts without prior
auth from Board. And evidence showed that Kalaw actually
handled the corp well for it to profit. Force majeure reason.

Fraud: There is no fraud because Kalaw didn’t need the
Board’s approval due to practice of trade. No negligence too
on his part.
ICB vs. Gueco—Joint Motion to Dismiss for the car.
Gueco spouses obtained a loan from UPC to purchase car and
executed prom note which were payable in mnthly
installments and chattel mortgage over car to serve as
security over the notes. Spouses defaulted in payment. The
payment was lowered but still no payment. Car was detained
inside the bank’s compound. Gueco went to bank and
negotiated and issued a manager’s check. But car was not
released bec Gueco doesn’t want to sign Joint Motion to
Dismiss claiming not in the contract that they have to sign.
Issue: WON the bank in not informing the spouses to sign
motion to dismiss liable for damages for not releasing car.
Held: No. Joint Motion to Dismiss for the spouses’ benefit and
not for the bank. It would only state that the case would be
dropped and that the spouses had fully settled his obligation
thus the dismissal of the case. There is no fraud—no
intentional and deliberate evasion of the normal fulfillment
of obligations.
Fraud: In not stating that they have to sign Joint Motion to
Dismiss but this is not considered Fraud. No intent and for
the benefit of the Plaintiff.
4. Negligence
Necessito vs. Paras—Knuckles killed the passengers.
Action against owners and operators of the commom carrier
known as the Phil Rabbit Bus Lines filed by one passenger and
the heirs of another who were injured as a result of the fall
into a river in which they were riding. The mother of the pet
drowned and the son Necessito was injured.
Issue: WON the carrier is liable for damages.
Held: Yes. Although resp claims that force majeure since
knuckles were the reason for the accident and they have
inspected the knuckles, does exercised diligence. Carrier
claims liability of manufacturer. Court said that the
inspection done was merely visual and not meeting the
requirement of expected due diligence.
Negligence: In not exercising the proper diligence required.
5. Contravention of the tenor of the obligation
Arrieta vs. Naric—Burmese Rice, di naman pala kayang
mag-open ng Letter of Credit.
Pet participated in the public bidding by Naric for the supply
of 20K MT of Burmese rice. Her bidding being the highest,
she was awarded the contract. In 1952, entered into
contract, Naric and Pet, sale of rice. Pet obligated herself to
deliver to the latter the tons os Burmese rice and in turn
corp has to pay for the imported rice by means of an
irrevocable, confirmed and assignable letter of credit in US
currency. It was only In July that def took first step to open
letter of credit. Pet already made a tender to her supplier a
5% and this will be confiscated if L/C will not be received
before Aug. 4. PNB informed Naric that L?C approved but has
a condition that the 50% marginal cash deposit be paid. Naric
was not in any financial position to meet the condition and
wrote the pet about it. L/C was opened in Sept thus 5%
deposit was forfeited. When appellee failed to restore
cancelled Burmese rice she offered a sub but Naric rejected.
Issue: WON Naric should be liable for damages.
Held: Yes. Failure of the letter of credit to be opened in the
contemplated period. Immediate cause of damages. No
necessary data but pet would not win bid had she not furnish
them with it. Waiver bec Pet suggested to sub it Thai rice.
Waiver are not presumed. Express stipulation.
Contravention: That Burmese Rice should be delivered and
should not deliver another thing.
Chavez vs. Gonzales
Contravention: That they agree that after 3 days, typewriter
would be usable.
E. Effect of fortuitous event
Necessito vs. Paras
Effect: Not fortuitous since knuckles should have been
inspected more than the visual inspection done.
Ampang vs. Guinco—the bus that skidded.
Held: The accident was caused by an accident which was
unforeseen and beyond the control of the company on its
driver.
Victoria Planters vs. Victorias Milling—30 years contract
suspended due to Japanese Invasion.
Held: 1174 relieves obligor from fulfilling a contractual
obligation (fortuitous event). The stipulation in the contract
that in the event of force majeure, the contract shall be
deemed suspended during the said period does not mean that
the happening of those events stops the running of the period
agreed upon. It only relieves the parties from fulfilling their
obligation that time. To require the pet to deliver the
sugarcane during the 6 yrs of suspension was impossible of
being performed. 6 yrs can’t be deducted from 30 yrs.

La Mallorca vs. De Jesus—tire blow-out.
Held: Cause of the blow-out was known. It was a mechanical
defect of the conveyance or a fault in its equipment which
was easily discoverable if the bus had been subjected to a
more thorough or rigid check-up before it took the road that
day. The bus was driving fast as was evidenced in the trial.
Nakpil vs. CA—Engr/Archi pati Contractors liable sa
pagguho ng bldg.
Phil Bar Assoc decided to construct its building in INtramuros
Manila. Construction was undertaken by UCCI on
administration basis and the plans and specifications of the
building were prepared by another party Nakpil. It was
completed in June 1966. In 1968, a strong earthquake hit
Manila and building sustained major damages. As temporary
remedy UCCI shoved up the building at its own expense. PBA
commenced action against UCCI for the partial collapse of
the building. Allegations were that there was a failure of the
contractors to follow plans and specifications and violations
by the defendants of the terms of the contract. Def then
filed against 3rd
party-architects who prepared plans and
specifications alleging collapse was due to the defect of it.
Issue: WON UCCI and Nakpil be held liable.
Held: Yes. The case was referred to the Commissioner and
found out that there were defects in plans and specifications
and that contractors failed to observe requisite of
workmanship and even the owners failed to observe requisite
degree of supervision in the construction. Fortuitous even
will not be applied bec there is negligence. 1723 will apply.
Engineer/ arch who drew up plans and spec liable for
damages. Contractor liable if edifice falls within the same
period on acct of defects in the construction or the use of
materials of inferior quality. Engr/archi will be held solidary
liable if supervises construction.
Fortuitous Event: Will not apply bec there is negligence.
Austria vs. CA—Naglakad mag-isa sa gabi, nanakawan ng
diamond pendant.
Abad acknowledged receiving from Austria one pendant with
diamonds valued at P4,500 to be sold on commission basis or
to be returned on demand. While walking home, Abad was
robbed and her things were taken including pendant. Estafa.
RTC ruled negligence. CA held that robbery was established,
fortuitous event.
Issue: WON Abad is liable for the loss of the pendant.
Held: No. It was undisputed that Abad was a victim of
robbery. Even when she walked alone at night knowing that
she had with her the pendant and a large amount of money,
the crimes then were not as prevalent as the present time.
Fortuitous event: Robbery was unforeseen and evidence
established that it happened.
Vasquez vs. CA—sinabi na sa captain na may bagyo,
tumuloy pa rin. Lumubog.
Pioneer Cebu left the port of Manila. The vessel encountered
a typhoon and struck a reef and subsequently sank. Plaintiffs
seek the recovery of damages due to the loss of children and
other people due to voyage. There was a storm as def claims
but it was established that the captain knew about it but still
proceeded.
Issue: WON fortuitous event shall be considered and exempt
def from liability.
Held: No. They already knew the risk they were taking. They
already receive report of the typhoon but proceeded anyway.
Def claim Art. 587 Code of Commerce, loss of vessel exempt
liability. But it is cited there that the liability of the owner is
limited to the value of the vessel or to the insurance
thereon. It was held that the insurance of the vessel would
be liable for the damages that the shipowner or agent be
liable for the death of the passengers.
Fortuitous Event: Will not apply bec captain had knowledge
of the event thus making it not unforeseen.
F. Usurious transactions
Angel Jose Warehousing Co vs. Chelda—Loans with
usurious interest, principal still enforced but interest not.
(P20K+)
Angel Jose filed against Chelda, its capitalist partner for the
recovery of the unpaid loans with legal interest and atty’s
fees (P20K+). Def paid bal of P5.6K. Plaintiff charged and
deducted from the loan usurious interest at the rate of 2%
and 2.5% PER MONTH and consequently, as claimed by def
should not be permitted to recover under the law. RTC-
P1048.15 usurious interest which the payment was deducted
from the interest and def claims that it should have been
deducted from the principal obligation.
Issue: a. WON in loans with usurious interest, the plaintiff
may still recover the principal of the loan.
b. WON the illegal terms as to the payment of interest
renders nullity as to the payment of the principal debt.
Held: a. Yes. Creditor may still recover principal of the loan.
Loans with usurious interest are not totally void but only as
to the interest. Renunciation of the principal would
extinguish accessory but waiver of the accessory would not
extinguish the principal.
b. Yes. Divisible contract, that which is illegal can be
separated from legal ones and the latter may be enforced.
Interest which would be allowed is the interest bec of delay
and default due to the general provisions of the law.
Usurious obligation: Principal only, usurious interest not
enforced.

Briones vs. Cammayo—P1500 lang utang pero interest P300
per year-usurious.
Briones filed against Cammayo to recover P1500. They
executed a real mortgage as security for the loan of P1200
given by Cammayo upon usurious agreement and reserved to
himself P300 payment of interest for a year. Plaintiff paid
total sum of P330 but Cammayo refused to acknowledge it as
payment for principal but for interest of loan for a year.
Issue: WON creditor entitled to collect the principal
obligation and interest.
Held: Yes. But only as to the principal. Ruling of Angel vs.
Chelda.
Usurious obligation: Principal only, usurious interest not
enforced.
G. Presumption of interest and installments
***Hill vs. Veloso
***Vda De Ongsiako vs. Cabatuando
H. Action Subrogation
Accion Subrogatoria: action which the creditor may
exercise in the place of his negligent debtor in order to
preserve or recover for the patrimony of the debtor the
product of such action, and then obtain therefrom the
satisfaction of his own credit. Double function: conserving
the patrimony of the debtor by bringing into it property
abandoned or neglected by him AND of making execution
on such property effective thereafter. “Debtor’s debtor is
my own debtor”. Debtor who is sued may set up against
the plaintiff the same defense he could set up against his
own creditor. If the action succeeds, the plaintiff is
entitled only to so much as is needed to satisfy his credit;
if there is any balance, it shall pertain to his debtor.
Goldstar Minig vs. Lim Jimena—mining claims pinondohan,
hindi na siya binayaran sa usapan.
Jimena lent to Lincallo money to purchase mining claims and
they agreed that ½ f the proceeds shall be given to Jimena.
Mining rights over part of the claim were assigned to Gold
Star before WWII and copr paid Lincallo P5000 royalties.
Lincallo entered contracts without the knowledge of
Jimeana. Marquez contracted with Gold Mining and 45%
should go to Lincallo. Another company contracted and
stipulated 43% would go to Lincallo. Jimena demanded part
but he was not paid.
Issue: WON Jimena has a cause of action against Gold Mine
when it contracted only with Lincallo.
Held: Yes. Art. 1177 provides that creditors after having
pursued the property in possession of the debtor to satisfy
their claims, may exercise all the rights and bring all the
actions of the latter (debtor) for the same purpose, save
which are inherent in his person. 1883: the principal may
sue the person with whom the agent dealt with in his own
name, when the transaction involves things belonging to the
principal.
AS: File against debtor of his debtor.
Estate of Hernandez vs. Luzon Surety—namatay yung
guarantor, namana rin yung utang niya.
Luzon Surety filed against estate of Hemady based on 20
different indemnity agreements and couterbounds by the
deceased in consideration of guaranteeing various principals
in favor of different creditors. Hemady died and estate claim
not liable bec of death.
Issue: WON death extinguishes obligation of the estate.
Held: No. Obligations extinguished by death are: a. support
b. parental auth c. usufruct d. contracts for a piece of work
d. partnership e. agency. Articles that regulate guaranty or
suretyship contain no provision that the guaranty is
extinguished upon the death of guarantor. Art. 774 and 776
(succession and inheritance) state that heir succeed no only
to the rights but also to the obligations.
AS: Obligation was subrogated to the heirs of the dead
person.
III. KINDS OF OBLIGATION
A. PURE AND CONDITIONAL OBLIGATIONS
1. Pure Obligations
Pay vs. Palanca—naningil ng utang after 15 yrs,
nagprescribe.
Held: Every obligation whose performance does not depend
upon a future or uncertain event or upon a past unknown to
the parties, it is demandable at once.
2. Conditional Obligations
a. with suspensive/resolutory conditions
Lichauco vs. Figueras-Hermanos—Lorchas, emergency and
regular use.
Held: The amendment to the contract bet the plaintiff and
def was expressly conditioned on the defs being the
successful bidders at the letting and they were not the
winners. Second contract has no force but the first one. No
showing that they have given new life to the agreement.
Wise & Co vs. Kelly—hindi naman sinabi na ibenta yung
goods sa ganitong halaga.

Held: No proof that Kelly has not turned over all the money
received from the sale of the merchandize so that Lim, the
surety, has no liability. The condition is that Lim will pay if
Kelly has not turned over all the sales of the merchandise but
not that he shall pay if all the sales has not amounted to the
original amount of obligation. There is no stipulation that the
goods were to be sold at a certain price, or not less than
what it should be.
Santiago vs. Millar—nanalo sa sweepstakes pero nawala ang
ticket.
Held: The ticket sold has a notation that prize will be paid
upon the surrender of the ticket. The surrender or
presentation of the ticket is a condition precedent of
payment.
Parks vs. Prov of Tarlac—nagdonate ng land for school and
public park in 6 mos pero hindi ginawa.
Cirer and Hill were owners of parcels of land and donated it
to the municipality of Tarlac on the condition that erection
of a public school and a public park shall be commenced
within the period of 6 months. Tarlac failed. Cicer and Hill
sold land to Parks. Parks pray for annulment of donation.
Issue: WON Parks is the owner of the land bec of non-
performance of the condition of the mun of tarlac.
Held: No. The action for revocation of a donation is 10 yrs.
They have filed case after 14 yrs. Although condition was
not complied with, revocation should have been made before
the sale of the land. Req: 1. consent of the donee of the
revocation 2. judicially decreed. Onerous donations, 10 yrs
prescription.
CPU vs. CA—nagdonate ng land for medical school pero
hindi ginawa. No period but 50 yrs na nakalipas di pa rin
ginawa.
Don Lopez donated land to CPU on the condition that it
would be used for the establishment of a medical school and
that CPU cannot sell or convey the land to any party. CPU
failed to do so and even exchanged land with another with
the NHA. Heirs filed for annulment of donation.
Issue: WON donation annulled.
Held: No. Although there is a need to fix a period bec the
contract did not stipulate period when to commence
condition. However, in consideration of the facts, 50 years
have lapsed for the condition to be complied with and CPU
was not able to perform. SC ruled to reconvey to heirs the
land.
Aguilar vs. Cititrust—yung hindi ko maintindihang kaso or
baka hindi lang siya talaga relevant under this title.
b. Potestative Mixed Conditions
Shotwell vs. Manila Motor—Banks were chartered to accept
liability.
Held: The banks will not be liable since they didn’t accept
that they will should liability. The lease was extinguished by
the fire that occurred and the chartered banks being a
sublessee of the Manila Motor which contracted lease also
from Shotwell, will not be liable for the construction of the
destroyed buildings. No potestative condition.
Lease for the enjoyment of the premises. No fault on part of
anyone.
Smith Bell vs. Sotello Matti—i-deliver yung equipment pero
depende sa gobyerno.
Held: The conditions did not depend upon the will of the
debtor alone. There is no delay since there existed rigid
restrictions during the that time of world war. It is a mixed
one because dependent also of the will of the third person or
the US govt whether to allow the delivery or not.
Trillana vs. Quezon Colleges—if I harvested fish.
The stipulation in this case was that the obligor would pay
the full value of a subscription for shares in the Quezon
College after she had harvested fish.
Held: This condition is obviously depended upon the sole will
of the obligor, and the conditional obligation is void, because
it would have served to create an obligation to pay, the
whole obligation is void.
**When conditional obligation is void, then it would convert
the obligation to a pure obligation which would be
demandable at once.
Osmena vs. Rama—If the house of strong materials is sold, I
will pay my debt.
Held: If the statement found in the acknowledgement should
be regarded as a condition, it was a condition dependent
upon the exclusive will of the debtor, and is, therefore, void.
The acknowledgement, therefore, was an absolute
acknowledgement of the obligation and was sufficient to
prevent the statute of limitations from barring the action
upon the original contract.
Hermosa vs. Longara—as soon as I receive funds derived
from the sale of my property in Spain.
Held: The condition implies that the obligor has already
decided to sell his house or at least that he had made his
creditors to pay his indebtedness demandable is that the sale
be consummated and the price thereof remitted to the
islands. Not a purely potestative one, depending upon the
will of the obligor, but partly upon chance, i.e. presence of

the buyer of the property for the price and under conditions
desired by the obligor.
c. Impossible and Illicit conditions
Luneta Motor Co. vs. Abad—if I recovered judgment in the
action but he died during the trial.
Held: The obligation is subject to the condition that when
the plaintiff recovered judgment, they shall deliver the
property so released to the officer of the court for the
payment of said judgment of in default, pay its full value.
Since Abad died, it has become a legal impossibility since no
judgment shall be rendered.
Galang vs. CA—you pay 25% within 3 months or upon the
removal of the encargado.
Held: The removal of the encargado was not a condition
precedent to the fulfillment of the contract. What we have is
a contract to sell wherein the ownership is retained or title
until the fulfillment of a positive condition, normally the
payment of the purchase price in the manner agreed upon. It
was just an alternative period for the payment of the second
installment.
d. positive and negative conditions
3. Constructive Fulfillment
Taylor vs. Uy Tieng—dapat may trabaho siya pero binawi ni
Uy Tieng dahil di maganda sitwasyon. “FOR ANY REASON”
Held: “Should the machinery to be installed in the said
factory fail, for ANY REASON, 6 months from the date hereof,
this contract may be cancelled”. The def can rescind the
contract bec their reason falls under “any reason”.
But there is no constructive fulfillment on this case.
Constructive fulfillment: condition shall be deemed fulfilled
if the obligor intentionally impedes its fulfillment, has no
application to the cases of the resolutory provision giving to
the obligor a right to cancel contract upon contingency
within the control of the obligor.
Herrera vs. Leviste—GSIS and Leviste Case. Teehankee’s
Dissent.
Tehankees Dissent: Leviste was guilty of bad faith and
violated the terms of the contract thus there is constructive
fulfillment. Herrera was required by GSIS to submit papers to
support his assumption but could not be approved until
Herrera could submit a final deed of sale and Leviste did not
execute this deed. He prevented the assumption of Herrera
of the mortgage. Not only that, Leviste is in arrears for 14
months in its amortization and Herrera did not know that.
1186 and 1169 (reciprocal obligations).
Tayag vs. CA—estopped bec receipt of payments and
knowledge of irregularities.
Held: The acceptance of the petitioners of the various
payments even beyond the periods agreed upon, was
perceibved by the lower court as tantamount to faithful
performance of the obligation. 1186 applies to both obligees
and obligors in reciprocal obligations even when the proviso
only speaks of the obligor. Pet accepted the performance
knowing its incompleteness and irregularity and without
expressing any protest or objection, the obligation is deemed
to be complied with.
Coronel vs. CA—Receipt of Downpayment
Held: Intent of the parties has to be considered. It was a
contract of sale and not a contract to sell. Contract of sale—
ownership already transferred upon fulfillment of the
suspensive condition. Absolute sale. Contract to sell-although
suspensive condition was complied with, ownership will not
automatically transfer. There is still a need to convey title to
the prospective buyer by entering into a contract of absolute
sale.
4. Retroactivity of Obligation
Padilla vs. Paterno-his mom is the universal heir and not
his wife-paraphernal.
Held: The ownership of the land is retained by the wife until
she is paid the value of the lot, as a result of the liquidation
of the conjugal partnership. There mere construction of the
building from common funds does not automatically convey
the ownership of the wife’s land to the conjugal partnership.
The properties’ conversion from paraphernal to conjugal
assets would be deemed to retroact to the time the conjugal
buildings were first constructed thereon or at the very latest,
the time before the death of Narcisso Padilla that ended the
partnership. The acquisition by the partnership of theses
properties was subject to the suspensive condition that their
values would be reimbursed to the widow at the liquidation
of the conjugal partnership; once paid, the effects of the
fulfillment of the condition should be deemed to retroact to
the date the obligation was constituted.
Coronel vs. CA—Downpayment
Retroactive: From the moment the obligation was
constituted, upon payment of full balance, retroact to that
date.
5.Preservation of Creditor’s Rights
Art. 1188: The creditor may, before the fulfillment of the
condition, bring the appropriate actions for the
preservation of his right.
The debtor may recover what during the same
time he has paid by mistake in case of a suspensive
condition.

6. Rescission in Reciprocal Obligations
Ocejo vs. Interbank—maswerteng assignee.
Yung asukal na nasa ibang warehouse na kinuha ng banko.
Held: The thing sold not subject to condition that the buyer
was the pay the price before the delivery. On demandability:
No term having been stipulated on payment, it should be
demandable at the time and place of the delivery of the
thing sold. Demandable at once and failure to do so would
entitle obligor either performance or rescission. But
rescission should be applied to the court for a decree for the
rescission of the contract. No rescission was made before
the insolvency of plaintiff, the assignee standing on the shoes
of the buyer has a better right.
Albert vs. University Publishing—publishing the Revised
Penal Code.
Held: It was the defendant corporation who had breached
the contract. The plaintiff has written letters reminding the
corp that the contract will be deemed rescinded if the corp
would not fulfill its obligation.
Accg to Tolentiono: Rescission must be judicially invoked.
Unless there is a stipulation of period when the contract
would be deemed rescinded. If one party is willing to
perform and the other is not extra-judicial rescission would
suffice if there is stipulation. However, if there has been a
performance already by one of the parties, rescission should
already be judicially invoked regardless whether there is a
stipulation or none, especially if the other party rejects
rescission.
UP vs. Delos Angeles—award of logging rights; rescission
without need of judicial suit.
Held: In the agreement, there is a stipulation that UP has
“the right and power to consider the Logging Agreement date
Dec 2 1960 rescinded without the necessity of a judicial suit.
1191’s consideration: There is nothing in the law that
prohibits that parties from entering into agreement that
violation of the terms of contract would cause cancellation
thereof even without court intervention. BUT PROCEEDS AT
ITS RISK. Extra-judicial resolution will remain contestable
and subject to judicial invalidation, unless attack thereon
should become barred by acquiescence, estoppel or
prescription.
Roque vs. Lapuz—10 yrs to pay, I can pay anytime within
the 10 years.
Held: Qualification for rescission: so substantial and
fundamental to defeat the object of the parties. Absence of
a formal deed of conveyance is a very strong indication that
the parties did not intend immediate transfer of ownership
and title, but only a transfer after full payment of the price.
Intent of the parties was to have the obligation be paid in
monthly installment.
Herrera vs. Leviste
Tehankee’s dissent: Upon Leviste’s refusal to execute the
deed of sale, Herrera has the option of specific performance
or the rescission of the contract.
Zulueta vs. Mariano—Avellana a movie director made
movies for Zulueta for his political campaign, automatic
rescission clause.
Held: There is an automatic rescission clause in the contract
and the fact that pet has cancelled contract, resp has no
right to remain in the premises. Extra-judicial rescission shall
only take legal effect where the other party does not oppose
it.
Delta Motor Corp vs. Genuino—delivery of black iron pipes
for iceplant and storage.
Held: Power to rescind under 1191 is not absolute. The act of
a part in treating a contract as canceled or resolved on
account of infractions by the other contracting party must be
made known to the other and is always provisional subject to
the scrutiny and review by the proper court.
Delta –no manifestation that it had opted to rescind contract,
it has possession of the two irons and the downpayment and
has waived the performance of conditions of the contract
when they opted to go on with the contract only with a much
higher price.
Ong vs. Bognalbal
Rescission: Upon the infraction of Ong, Bognalbal could have
filed rescission of the contract or the performance of it.
Carrascoso vs. CA—notice of lis pendence but continued
with the sale of the land.
1972-El Dorado sold to Carrascoso the parcel of land
July 1975- Buy and Sell bet Carrasco and PLDT
April 1977- Carrasco to PLDT
May 30, 1977 PLDT to PLDTAC
May 15, 1977-notice of lis pendens
Held: Notice of Lis pendens, but still PLDT conveyed land to
PLDTAC. Where a contract is rescinded it is the duty of the
Court to require both parties to surrender that which they
may have respectively received and to place each other as
far as practicable in his original situation. The exercise of the
power to rescind extinguished the obligatory relation as if it
had never been created, the extinction having a retroactive
effect.
B. OBLIGATIONS WITH A PERIOD
PNB vs. Lopez Vito—loan of spouses when there is a
condition and a period stipulated.

Held: The non-fulfillment of the conditions of the contract
renders the period ineffective, and makes the obligation
demandable at the will of the creditor. Failure to pay would
make the entire obligation due and demandable, so
regardless of the period of other installments, def has to pay
the entire obligation.
Smith Bell vs. Matti
Held: There also was a stipulated period however there is
also a condition which states that delivery would depend
upon the US govt. Upon the lapse of the period and the
condition bars the performance, def will not be liable.
Gaite vs. Fonacier—expiration of the surety, debtor loses
the benefit of the period. Mining claim case.
Held: 1198 states when debtor loses the benefit of the
period. The surety contract expired and Fonacier didn’t
renew or replaced the surety. Sale of the ore was not a
suspensive condition but a suspensive period, fixing the
future date of the payment.
Qui vs. CA—factory was razed to the ground and failure of
lease to rebuild the building of the lessee. (the building to
be constructed shall belong to the resp lessor after 20
yrs).
Held: 1197. If obligation does not fix a period but from its
nature and circumstance it can be inferred that a period was
intended , the courts may fix the duration thereof. Will also
fix period when it depends upon will of the debtor. In
determining period, courts will have to consider the
circumstances and see if period was contemplate. The
contract doesn’t stipulate a period, thus the court held that
resp has to institute a judicial action to fix the period. (this
case is an ejectment case so fixing a period was not alleged
in the case).
Sarmiento vs. Villasenor—loan with a pledge of a medal
with a diamond in the center with 10 diamonds
surrounding it, pair of diamond earrings, comb with 22
diamds, and two diamond rings! Daming diamonds!!!
Held: In a contract of loan with interest wherein a term was
fixed for the payment thereof, it is presumed that said terms
was established for the benefit of the creditor as well as that
of the debtor, unless from its tenor or other circumstances it
appears to have been stipulated for the benefit of one only.
In such a case the debtor has no right to pay the debt before
the lapse of said period, without the consent of the creditor,
and demand the devolution of the goods that were pledged
to secure the payment. Only after the expiration of said
period may the debtor make payment, and, therefore, the
action for the recovery of the goods pledged arises only after
the lapse of said for the purpose of the computation for he
period of prescription of said actions.
Daguhoy Enterprises vs. Ponce—nagsecure ng mortgage as
guaraty sa loan sa isang corp tapos after ibigay yung loan,
withdrew mortgaged properties then mortgage them again
sa ibang corp for another loan. Madaya.
Held: Although the contract stipulates that loan payable in 6
years, but because of the failure to give and register the
security agreed upon in the form of two deeds of mortgage,
the obligation becomes pure and without condition thus due
and immediately demandable. 1198, lost the benefit of the
period.
Victorias Planter, supra
De Leon vs. Syjuco—gusto ng magbayad ng debtor pero
ayaw pang tanggapin ng creditor.
Held: Consignation was not valid. Req: a. debt due b.
consignation has been made bec creditor to whom payment is
made refused to accept, or was absent or incapacitated c.
prev notice of consignation to the person interested in the
performance d. amount due placed at the disposal of the
court 3. after consignation had been made, the person
interested was notified thereof. Reasons why creditor can’t
be forced to accept payment a. may want to keep his money
invested safely instead of having it in his hands. B. to protect
himself of sudden decline on the purchasing power of the
currency loaned. Unless creditor consents, debtor cannot
accelerate payment.
Millare vs. Hernando—yung bahay niya gusting gawing resto
e ayaw niya nga.
Held: On the contract, it is stipulated that the lease may be
renewed after a period of 5 years under the terms and
conditions as will be mutually agreed upon by the parties at
the time of the renewal. 1197 and 1670 of the CC (fixing of
period, and after 15 days of occupying the leased property
and without any notice from lessor, contract shall be
renewed). It is understood that there is an implied new
lease, not for the period of the original contract, but for the
time established by 1682 and 1687. The other terms of the
contract shall be revived. After the expiration of the
contract, the implied new lease could not possibly have the
period of 5 years, but rather would have been a month-to-
month lease since the rentals were payable on a monthly
basis.
Pacific Banking Corp vs. CA—negosyo sa cultivation of fish
and saltmaking bumagsak.
Held: An agreement to extend the time of payment in order
to be valid must be for a definite time. The cause of action
was for the fixing of the period.
Song Fo vs. Oria—launch was sold but was shipwrecked,
Song Fo did not insure and Oria did not secure.
Held: The launch was with Oria already and knowing that the
launch has not been insured yet, sent it from Manila to Samar

60350002 taxation-1-case-digests

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